Good morning and thank you for waiting. We would like to welcome everyone to Ambev’s Fourth Quarter 2019 Results Conference Call. Today with us, we have Mr. Jean Jereissati Neto, CEO for Ambev; and Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website at ri.ambev.com.br, as well as through the webcast link of this call. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company’s presentation. After Ambev’s remarks are completed, there will be a question-and-answer section. At that time, further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev’s management and on information currently available to the company. They involve risks, uncertainties and assumptions, because they relate to future events, and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. I would like to remind everyone that as usual the percentage changes that will be discussed during today’s call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparisons with 4Q 2019 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Ambev’s normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the earnings release. Now, I’ll turn the conference over to Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. Mr. Tennenbaum, you may begin your conference.

Thank you. Hello, everyone. Thank you for joining our 2019 fourth quarter and full year earnings call. I’ll guide you through the financial highlights, including below-the-line items and cash flow. After that, Jean Jereissati will give more details about our operations in Brazil, CAC, LAS and Canada. Beginning with the main highlights, on a consolidated basis in the fourth quarter, top-line grew 5.7%, a combination of volume increasing 3.4% and net revenue per hectoliter up 2.2%. In the full year, net revenue was up 7.9% with volume growing 2.7% and net revenue per hectoliter growth of 5%. EBITDA reached R$6.9 billion in the quarter, an organic decline of 2.7% and the EBITDA margin decreased 370 basis points to 43.7%. In the full year, EBITDA was up 1.5% with margin contraction of 260 basis points to 40.2%. Our bottom-line performance was impacted mostly by a higher cost of sales resulting from significant commodity and transaction currency headwinds. Normalized net profit for the quarter was up 24.4%, delivering R$4.6 billion. In the full year, normalized net profit was R$12.5 billion, 8.5% higher than 2018. Our cash flow from operating activities was R$18.4 billion, in line with 2018. CapEx in 2019 was 42% higher than in 2018, with most of the increment driven to our innovation. Similar to last quarters, we continue to report the results of our operations in Argentina, applying Hyperinflation Accounting. I will now move to our divisional results and start with Brazil. In the quarter, Brazil EBITDA reached R$4 billion, a decline of 6.6% versus Q4 2018, while margins contracted for 150 basis points to 45%. In the full year, Brazil EBITDA was R$11.7 billion. We saw decline of 4.5% versus 2019, while margins contracted 500 basis points to 40.9%. In the full year, cash COGS per hectoliter increased…

Thank you, Fernando. Hello, everybody. Good morning, good afternoon. First of all, I would like to thank Bernardo Paiva for his almost 30 years of service to Ambev. We wish him the best of luck and success going forward. This is my first call. I would like to focus on 2 things. Quickly review 2019, what worked, what didn’t, and share my perspective on 2020 and beyond. Facing the brutal facts, 2019 was not an easy year, FX and commodities, headwinds pretty much across the board significantly impacted our profitability. We had a tough operating environment in important countries like Argentina’s macro environment, and Bolivia’s social harvest. The second half of the year was not good particularly in Brazil Beer due to competitive dynamics. And we continue to see the industry headwinds in Canada. On the other hand, 2019 was also a year where we delivered some important results and continue to invest behind our future growth. In Brazil, beer volume was back to growth and our top-line was more balanced. Our high-end portfolio delivered very solid performing, growing double-digit. Our innovation pipeline continued to connect the consumers and increase its relevancy in our results. In NAB had an overall excellent performance, meanwhile, COGS continue to deliver consistent strong results, not only in Dominican Republic, but also in Guatemala and Panama. In Canada, we continued to place important bets in our innovation pipeline and beyond beer portfolio, and last but not least, we pushed ahead on our transformation journey of becoming more consumer centric, more customer centric and digitally transforming our business. If we take a closer look at Brazil Beer, volume grew 3.2%, and that revenue per hectoliter increased 2.4%. Meanwhile, the industry estimated by Nielsen to have grown 2.4%. Speaking of our brand, the Skol family was back…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Isabela Simonato with Bank of America. Please go ahead. Ms. Isabela, your line is open.

Good morning, everyone. Good morning, gentlemen. Thank you for the questions. I would like to know, based on your guidance for Q1 with almost 20% EBITDA, if sales [come from barn] [ph] is that if you could address the main lines of the P&L, what will contribute to this EBITDA decline if you could give us some more color, contribution of each line to the decline? And moving forward in the year, within those lines, where is the main driver of recovery here, so we can deliver an EBITDA growth in the full 2020? Thank you.

Hi, Isabela, Fernando here. Let me put a little bit context behind it. We are excited about 2020 and we expect to grow EBIT in 2020. But given – when we look at our cost of goods sold kind of quarter-by-quarter, it’s fair to say that the peak cost pressure is going to be on the first quarter. And also, we decided to kind of invest a little bit ahead of the curve in terms of sales and marketing, because we are excited about the year so that is going to – there is going to be more investment in the beginning of the year. When we couple these 2 things then it leads to attest Q1. But we see the strategy that we have for the year. That’s why we decided to be upfront about it. So we don’t surprise the market. But our view is actually growth for the year. We just want to highlight that it’s going to be starting from a low base, because we’re investing ahead of the curve and we have some cost pressures in the beginning. But we gain momentum as the year goes by.

Thank you. But regarding the cost curve, when you look especially in the FX, actually we would expect the stronger pressure to come in Q4, right, when BRL depreciated the most? I mean, does the hedging policy continues to be the same? You have one year [in excess] [ph] or was anything different that would explain the cost pressure to be stronger in Q1?

No, it’s a combination. It’s a combination of FX and commodities. And it’s always – whenever you see year-on-year it was compared to the previous year. So we expect the biggest cost pressure to be Q1.

Okay, right. Thank you.

The next question…

And then just – sorry, just to reinforce, we mentioned that there FX cost pressures, we have commodity tailwinds. So the net-net is less cost pressure than we had in 2019.

Okay. That’s…

The next question is from Antonio Gonzalez with Credit Suisse. Please go ahead.

Hi, guys. Good morning. Well, firstly, Jean and Tennenbaum, congrats on your respective appointments recently and my best wishes for both of you. I got 2 questions if I may. First, Brito referenced this morning at the ABI call, revisiting the category expansion framework, right, I mean, some parameters of the model anyway, affordability, price elasticity and so on. And he cited some examples, Mexico, South Africa, Colombia. And I was wondering if you can elaborate on how this might apply to Brazil, specifically, I mean, if I look at this quarter, it is obvious that you guys pursued more volume instead of margins, right, and your pricing was a little bit more aggressive, et cetera. So I wanted to ask if you can frame these conversations for the very specific case of Brazil; and if you expect that volume acceleration to materialize already in 2020 or you would only expect a more gradual progression towards higher volume growth rate into the future? So that’s number one. And then, number two, I wanted to ask on your guidance and, I guess, the metric that you feel comfortable sharing with the market. You guys are not sharing a specific range of cost per hectoliter for this year, right, as it is in the last couple of years? And also ABI is providing this range for EBITDA growth, right, [to 25%] [ph]. So I understand that providing a very granular number market by market for you guys might be competitively sensitive. But I wanted to ask if directionally you can put in perspective this guidance from ABI. Would you expect a similar growth rate or is there any reason, perhaps a profit warning that you’re launching for 1Q in Brazil that should drive your overall growth below the range that ABI has indicated? Thank you.

Antonio, let me start by the second question, Fernando here and then Jean will tackle the first one. I believe our guidance at the end of the day is kind of to grow EBITDA in Beer Brazil. That was the important guidance. I believe the – you are calling profit warning. I will not say if I would call the same way, because it’s much more of a part of our strategy to invest a little bit ahead of curve. And some kind of a hedging dynamics that you know that your cost of goods sold are a little bit harder on the Q1. When we have these 2 things, if we issue the guidance to grow a bit, and we start if a very low Q1, I believe that could cause some noise. So rather be upfront about it. It’s part of our strategy. We want to invest ahead of the curve, because we’re excited for the year. And so that’s why we kind of give a very clear view on the Q1. So similar extent, I believe a couple of years ago, we also give guidance on cost of goods sold on soft drinks between Q3 and Q4, because the numbers were kind of a very volatile. And it was important to give the right direction to the market. So there was the context of the Q1 more than anything else. But to answer your question, the guidance for Q1 doesn’t impact anything at all, our view for the full year. It’s pretty much, how designed our plans since the end of last year.

Antonio, yeah, coming back to your first question. We are – we have been very excited about the category expansion framework. And we for – for the whole year, last year 2019 we have been tropical lies in it with this view about consumer-centric and looking for the Brazilian mindset. We made more than 30,000 interviews in Brazil with consumers, 15,000 samplings of products in the market new from competitors. We created in our Draftline internal agency, one area of social listening that we participate and we captured more than 16 million conversations about the year. And based on that, we kind of [tropicalizes] [ph] the category expansion that came initially from SAB to Brazil, a little bit more complex, a little bit more deep, and based on that we are really putting our efforts of resource allocation, and our efforts of really differentiating the brand, based on the occasions, and then fulfill this framework with the pipe – of our pipeline of innovation. And based on that, it was that Skol Puro Malte was launched. And it was a biggest contributor of our volumes in 2019. With that framework, we brought Bohemia that it was a brand that was very low profile to the core plus segment in the Classic Lager, and it’s really on fire. And with that 2, we implemented smart affordability play with the regional brands and Magnífica is doing amazing, Legítima and Nossa doing good too. So we are very excited about the way we are featuring the market today, and how the market will be in the future. Category expansion is really driving us, but in a deeper way, because we [tropicalized] [ph] it. And we saw our volumes back to growth in 2019 based on that learnings and based on the first initiatives that we have. And we believe that it views, we’re continuing move forward based on that strategy. Our volume will continue to gain momentum. Of course, Brazil is very volatile. For example, the Q1 that we had in 2019 was a very strong Q1 in terms of volumes. And we believe that in the bumps in the road, we want to see volumes really going up consistently.

All right. Thank you so much, Jean. Congratulations again.

Thank you.

The next question is from Luca Cipiccia with Goldman Sachs. Please go ahead.

Hi. Good afternoon, Jean and Fernando. I guess, congratulations to both of you for the new roles. And I was going to ask 2 questions. The first would be on to Jean, on pricing strategy and timing going forward. I was wondering, clearly on the last couple of years, it’s been a friction between support in volume growth, pricing, timing, competitive pressure, promotional activities so on and so forth. And so my question is, should we think about the future with Ambev, possibly being a bit more flexible with way – prices are above through into the market that we use to have a little bit of calendar fixed in the third quarter. And I’m curious to hear your views and whether that’s still going to be the case or you may be more opportunistic or anything may change on that front. So that would be the first question. And then secondly, I think, you make reference to a number of investments in technology, digital opportunities that I guess is a lot of – that it’s going on in that space. And then, I was curious, if you could maybe nearly down to – if you were to mention one particular initiative or one particular capability. What do you see things that could have the bigger impact for the performance? But also what do you see that Ambev actually could have be competitor advantage in doing some of this – implementing some of this initiative whether it’s through scale, whether it’s through proprietary capability or whatever else? I’m just curious to maybe narrow down a little from a priority or impact standpoint? Thank you.

Okay. Thank you very much, Luca, for the question. Look, over the long run, price really should grow in line with inflation eventually disposable income. And what we have learned over the last few years. I’m talking about the higher level strategies that depending on the economic environment, sometimes it’s preferable to adopt more inclusive pricing strategy in order to bring more consumers to the category. What we see Brazil, it is that everybody is very optimistic, we see a little bit confidence going up. But Brazilian consumer still, income is still not recovering with strength. And so we have to be very cautious about that, looking at this number. On top of that, when we layout on the execution on the season of the calendar and the pricings, we always take in consideration besides the macro scenario, the elasticity, the channels that is important to see here in Brazil, the channels in the mix trends. The category expansion opportunities, where we are bringing a lot of innovation that we have the mindset of being accretive. So it’s part of our plan. And the competitive dynamics, when we see from 2015 to 2018, with the economic crisis, our volumes declined, it’s 10 million hectoliters. And we have a very rigid and we very disciplined price strategy, independent, if we were with a positive macro scenario or with or in crisis. And we suffered some million hectoliters, because of that. In 2019, we saw consumer sentiment improving even though disposable was not rebounding. But we were making progress to recover 2.3 million hectoliters of volumes with the conduct that we had last year. Even though, the calendar, it is something that kind of – it was kind of frustrating a little bit last year, because it was very volatile you see…

Thank you. Very clear. Just a real quick, this 220,000 that you mentioned that would be a share of total or out of a total? Or is – could you put that in context maybe and whether maybe here…

25% of our clients that…

25%.

Some type of connection through digital.

Perfect. Thank you. Thank you very much.

The next question is from Robert Ottenstein with Evercore. Please go ahead.

Great. Thank you very much. Just first one, I want to echo the congratulations to everybody in terms of their terrific accomplishments, Bernardo, and the big moves that have been recently announced. In terms of the quarter, I just want to push a little hard on a couple of things. The revenue per hectoliter for beer being down, if you could talk a little bit about – you kind of piece that apart? And particularly, what impact the smart affordability initiatives had on that, maybe give us a sense of how much of your mix is smart affordability and the impact on the volume? So that will be the first question. And the second question, a little bit follow-up on the technology side, and in some of the new initiatives that you talked about at your sell side or investor event in Brazil last year, is where things stand on the direct-to-consumer initiatives? What sort of progress you’ve had since then, perhaps, what percentage of the country is now – with the logistics work, which is now covered by direct-to-consumer, and where do you see that going? Thank you.

Thank you. Thank you, Robert. Thank you very much for your question. First of all, talking about net revenue per hectoliter. What happened in Q4? As we anticipated in Q3, it was much more about the competitive dynamics and the stickiness of the price increases, and then this smart affordability play, okay. So this smart affordability play for you to know is 10% of my volumes. We are happy with that. It is [smart] [ph], because we know where to do, how to do. What’s really happening in Q4, it was a little bit of the dynamics of the Q3 inside a part of the Q4. And we anticipated this in last quarter. Having said that, if you look at the level of the net revenue per hectoliter that I had in the Q4, it was a – it is still with all of that, not in terms of percentage of growth, but in the level – it is a healthy level for us we start the next year, we start 2020, okay. So this is what I can tell you about net revenue per hectoliter. The second thing is about direct to consumer. Our vision, it is that this year, we should get to 4% of our total net revenue with a direct transaction with consumer. The thing I’m more excited about, the second thing I’m more excited about in terms of technology, the first one I mentioned is the contact strategy of the future. The second one, it is part of our innovation hub that I mentioned. We are innovating in 5 dimensions: flavors, products with differentiation inside the pure malt, health and wellness and then I put their convenience. And in the convenience piece, there is a, so a demand from consumers. We are working a lot on packaging, lighter, bigger, smaller, more convenient packages. But we have a venture that’s called Zé, Zé Delivery. It’s a venture that guarantees beer at supermarket prices, codes, in 30 minutes at home. So this is a direct transaction with consumers, a great value proposition. And it’s just on fire, okay. So this is the main initiative that we have for DTC. We are doing 2 million orders in 2019 and this is expanding very fast, because we are expanding the cities. And it’s a big opportunity for us. So in terms of DTC, Zé Delivery is the most important, is part of our innovation hub, is a venture. And it’s really on fire.

And what part of the – or what percentage of the Brazilian population is today reachable within 30 minutes and where do you think that will be at the end of the year.

Robert, for you to understand how Zé Delivery works, Zé Delivery we connect consumers to our own, our traditional point of connections or point of sales. So it’s fair to say that most of the Brazilian population is within 30 minutes from a given point of sale.

But the app is still with the footprint. The app in the advertisement and everything is still in around 40 cities of Brazil and we are expanding very fast. So the capability to go all over Brazil in the next 3 years.

Very impressive, thank you.

The next question is from Thiago Duarte with BTG. Please go ahead.

Hello, everybody. Thanks for the opportunity. I have 2 questions. First of all, it’s actually related to dividend payments and the timing of those dividends last year. I mean, last year, you didn’t pay any interim dividends and you ended up paying a larger amount of interest on capital by the end of the year, which provided a bigger tax break in the fourth quarter. So my question would be whether we should expect the same dividend or capital distribution policy in 2020 and beyond or whether this was onetime event for any reason in 2019? That would be the first question. And second, going back in – or circling back into the discussion about the revenue management initiatives and as you guys mentioned the first station regarding the timing of the price increases last year and how that affected Q3 and into Q4. I think it was Jean, who mentioned in the last question about having inadequate entry revenue per hectoliter in 2020. So if you could just elaborate that a little bit more, I mean, my question is whether you would say that the revenue management initiatives that were implemented in Q4 should exist only in Q4 or we should expect a little bit more of that into the beginning of 2020, particularly with regards to how historically revenue per hectoliter has decreased in Q1 relative to the Q4. So just wanted to understand what’s the cruise speed there in terms of revenue per hectoliter will be helpful. Thank you so much.

Hi, Thiago, Fernando here. So first on your question on dividend payments, I believe we even had this same question on a couple of calls last year. And I think after the fact, now it’s easier to understand that the reasons why we postponed the dividend towards the end of the year. For this year, probably the base case should be something similar. But these things are dynamic. Sometimes it depends on FX movements. You might have FX components on your accounts and you may have a different decision. But more likely than not, we should be following similar pattern. On the revenue front, I don’t think your kind of assessment of normally – you start on a higher base, then you get into summer, which is normally a moment that you get a lot of volume, lot of events. Sometimes you activate a little bit more, so your net revenues per hectoliter, it slipped down a little bit. I don’t think there is any difference. But what I – what Jean was referring to is that when you look the absolute levels that we start the year, when you see where the market is, I believe it’s healthy level for us to start the year and implement our price and volume strategy going into 2020.

Okay, okay, thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jean Jereissati Neto for any closing remarks.

So, guys, thank you very much. My first call with you, it was a little bit of one sided that I’m responding questions. I really want to be closer, have time in my agenda to be closer to you and get more feedback and make this conversation richer me in this process of this journey that I’m assuming now. So thank you very much for all the questions and let’s keep in touch. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.